Prices and rents – Warsaw compared to other EU capitals

Recent quarters have brought dynamic changes in European economies. COVID-19 pandemic and restrictions imposed in its consequence, as well as activities aimed at counteracting their negative effects, have had a significant impact on the housing markets of European cities, changing not only the level of prices, but also rents. Therefore, we decided to review prices and rent levels in capitals of EU countries.

The analysis covers prices and rent rates of apartments of the floor area ranging from ​​45 to 55 square meters, of an average standard, located outside strict city centres. The rent rates are considered net rents, excluding administrative fees. It should be noted that due to the vide scope of the topic and, at the same time, limited volume of this elaboration, this analysis does not take into account all the differences and conditions on individual markets, including the issues related to administrative regulations of rents or differences in the standard of buildings, providing only a simple statement of values ​​for particular locations. Two capitals, Valetta (the capital of Malta) and Nicosia (the capital of Cyprus), were not included in the list, due to lack of available data.

The analysis is based on data from both websites of official statistics (Eurostat, ec.europa.eu) and websites devoted to the quality of life (numbeo.com) and real estate residential market in individual countries.

Among the EU countries capitals, Paris is the unquestionable leader in terms of the level of housing prices. The average price of 1 square meter of an exemplary apartment in French capital equals to PLN 43 426. Slightly lower, although still very high prices are paid in Luxembourg – PLN 37 460 and Stockholm, where the transaction prices equalled to PLN 26 190. Meanwhile, the lowest prices were recorded in Riga, Bucharest and Sofia – respectively PLN 5 790, PLN 5 200 and PLN 5 015 per square meter. Thus, a nearly nine times difference in the price of 1 sqm of a flat was recorded between the most expensive and the cheapest capital city in the European Union.

The level of housing prices also shows a clear division of the continent. Apart from Paris, which due to the specific location advantages and the disproportionately high demand for real estate from foreigners, somewhat evades the rules, the highest housing prices were recorded in the capitals of northern European countries – Scandinavian countries, Germany, the Netherlands and Ireland. Slightly lower prices are observed in the southern EU countries and in the region of Central Europe, while the cheapest apartments can be purchased in the capitals of South-East Europe and in the Baltic states. Out of 25 surveyed capitals, Warsaw occupies 17th place in this ranking. The average price per square meter of the model apartment in Polish capital was PLN 11 600. Thus, Warsaw turned out to be more expensive than Budapest, Zagreb and Athens, where average prices were recorded at the level of respectively PLN 9 140, ​​PLN 8 870 and PLN 7 730. Among the capitals of the Central and Eastern Europe region, prices clearly higher than in Warsaw are noted in Prague and Bratislava. The average price of the square meter of a flat in the Czech capital was PLN 17 096 (more than in Rome or Brussels), and in the capital of Slovakia – PLN 12 362.

CHART 1. AVERAGE PRICES OF 1 SQM OF A MODEL FLAT IN CAPITALS OF 25 EU COUNTRIES (EQUIVALENT IN PLN)

source: AMRON Centre own study

For understandable reasons, the most expensive capital of the European Union – Paris – occupies the last place in comparison of price availability of flats, expressed as the proportion of the price of a square meter of a flat and the average net income recorded in particular cities. For an average monthly salary, a Parisian can buy only 0.30 square meters of a flat. Interestingly, only a slightly larger area can be afforded by a resident of Prague, occupying the penultimate place in the ranking (0.34 sqm) or Lisbon – 0.38 sqm. It seems that in case of both these cities, as in case of Paris, the reasons for this phenomenon should be found primarily in their attractiveness.

Inhabitants of the capital of Ireland are in the best situation in this respect. Monthly salary allows them to buy 0.75 sqm of an apartment. Sofia in on the second place in this ranking with 0.7 sqm. However, while in case of Dublin such a result is dictated primarily by the average wage (over EUR 2 500), in case of Sofia it is rather relatively affordable level of housing prices. Warsaw, with 0.46 sqm, is on 18. position, with accessibility comparable to Luxembourg and Athens (in both cases also 0.46 sqm) and slightly higher than in Ljubljana, Rome and Budapest (0.44, 0.44 and 0.42 sqm, respectively).

CHART 2. HOUSING ACCESSIBILITY IN CAPITALS OF 25 EU COUNTRIES

source: AMRON Centre own study

The situation is slightly different in terms of rent rates of flats. The highest rent rate for a model flat among the analysed European capitals was again recorded in the capital of Ireland. The average monthly fees amounted there to PLN 6 440. The residents of Amsterdam and Luxembourg pay slightly lower, although still high rent rates (PLN 5 736 and PLN 5 639, respectively). The lowest average rent rates level was recorded in Riga (PLN 1 396), Bucharest (PLN 1 287) and Sofia (PLN 1 255). Warsaw with an average rent of PLN 2 436 was placed on the list between Lisbon, where the average rent rate for the analysed flat equalled to PLN 2 937 and Prague (PLN 2 385). The average rent rate recorded in Warsaw was the highest among all capitals of the former Eastern Bloc countries (obviously except for Berlin, where the average rent rate equalled to PLN 3 061).

CHART 3. AVERAGE RENT RATES OF A MODEL APARTMENT IN CAPITALS OF 25 EU COUNTRIES (EQUIVALENT IN PLN)

source: AMRON Centre own study

The comparison of rental availability (understood for the purposes of this analysis as the proportion of average rent and average net income) shows that residents of Berlin spend proportionally the least on renting a model apartment, compared to other analysed cities. The average rent rate for the surveyed type of apartment in German capital is only 24.1% of local average net income. The inhabitants of Brussels (28.1%) and Vienna (29.4%) are also in a good situation. However, the citizens of Lisbon are at the opposite side. The rent rate for a model apartment In Portuguese capital accounts for as much as 55.6% of the average net income. Rental availability of flats is slightly higher in Dublin (49.7% of the average net income) and Rome (47%). Unfortunately, the capital of Poland is ranked high, on 5. position, being only slightly overtaken by Athens (46.1%). The average tenant of a model flat in Warsaw spends 46% of his monthly income on rent. This is again the highest result recorded in the region.

CHART 4. RENT AVAILABILITY IN CAPITALS OF 25 EU COUNTRIES (MODEL FLAT)

source: AMRON Centre own study

Interesting conclusions can also be drawn from the analysis of simple rates of return on investment in a model flat for rent in individual European capitals (in an annual period). Once again, Dublin is the leader of the ranking with the simple rate of return exceeding 8.8%. This is mainly due to the high level of rent rates recorded in the capital of Ireland. By contrast, the lowest rate of return was recorded in Paris (only 2.2%), which in turn results from high housing prices. The rates of return for the other researched locations ranged from 6% for Sofia to 3.3% for the Czech capital. Warsaw, where the rate of return, despite the decline in rents caused by the COVID-19 pandemic, equalled to 5%, took 11. place in the ranking and was overtaken by, among others, Madrid, Athens and Copenhagen, where the rate of return was recorded at the same level of 5.2%. Similar values of return rates to that recorded in Warsaw were also recorded in Tallinn (5%) and Rome (4.9%).

CHART 5. RATE OF RETURN ON INVESTMENT IN MODEL APARTMENT FOR RENT IN ANNUAL PERIOD IN CAPITALS OF 25 EU COUNTRIES

source: AMRON Centre own study

Jerzy Ptaszyński
Research and Market Service Director